Mr. Herbert Morrison, whose appointment as Secretary of State for Foreign Affairs was announced on 9 March, had no particular qualifications for this high office. The Prime Minister may have felt that his resilience and adaptability, and the general contact with external affairs that must come incidentally to anyone with ten years of Cabinet experience, would enable him to meet the demands of an exacting appointment, and it was in any case difficult to find any more suitable choice among the available party leaders. There seems no reason to think that he hankered after the post. If there were to be an election in six months or a year, and if no crisis of exceptional gravity arose, then Mr. Morrison might stop the gap without disaster. As it happened, the British Government were soon involved in Persia in one of those dilemmas of democratic foreign policy from which no political reputation can escape umbruised.

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By this stage the Anglo-Persian crisis was at its height. It first began to impress itself on British public opinion when General Razmara, the Prime Minister, was murdered on 7 March 1951, in circumstances which foreshadowed an uncompromising attack on the position of the Anglo-Iranian Oil Company (A.I.O.C.) in Persia. Negotiations between the company and the Persian Government had already been in progress since 1948, when the A.I.O.C. had taken the initiative in proposing interim additional payments to obviate any immediate loss of revenue to Persia resulting from the British Government’s policy of dividend limitation. The Persian representatives were, however, content to leave this matter for adjustment in a more comprehensive settlement, and a Supplemental Agreement was signed by a representative of the A.I.O.C. and the Persian Minister of Finance on 17 July 1949. During these negotiations the validity of the 1933 Convention, on which the company’s operations rested, was never questioned by the Persian Government. The Supplemental Agreement gave greatly increased royalty and other advantages to Persia, and its terms were more favourable than those offered at the time by any other oil company to any country producing oil in the Middle East. The proposals, however, at once met with opposition in the Majlis from the followers of Dr. Musaddiq ; a General Election followed, and it was not until June 1950 that a further step was taken, when a Majlis Commission of 18 was set up to examine the terms. The chairman was Dr. Musaddiq. [Mohammad Mossadegh] After six months’ discussion it reported, early in December 1960, that the proposals did not satisfactorily safeguard Persian rights and interests. General Razmara was a courageous man, and when Dr. Musaddiq put a formal proposal to the Oil Commission on 19 February 1951 for the nationalization of the Persian oil industry the general was well aware that he was faced with personal violence. It seems, however, that he was now highly unpopular, and he appears to have lost his grip on the Majlis ; there was a strange episode on 3 March when he made a speech to the Oil Commission explaining the unwisdom, on technical and economic grounds, of interference with a concern so vital to Persia’s well-being as the company, deposited memoranda supporting these arguments, and then hurried out of the meeting. He received a letter on the following day warning him that he would be murdered.

The company’s case on both legal and technical grounds appeared to be a strong one. The Convention of 1933 had provided (Article 21) that the Convention should not be annulled by the Persian Government, nor should its terms be altered either by general or special legislation in the future, or by administrative or other executive acts ; any difference of any nature whatsoever between the parties was to be settled by arbitration (Article 22), and the Convention could not be terminated before 31 December 1993 unless the company should surrender the concession (Article 26). On technical grounds the case for continuance of the company’s activities was that the company commanded the expert knowledge, the staff, and the marketing organization, tanker fleet, and goodwill overseas necessary for the continued prosperity of such a vast concern, and that Persia did not ; nationalization, whether due to greed for quick wealth or to the adult instinct of a proud people, could not create this expertise. Unfortunately the strength of the company’s case was not generally understood in Persia at this time. Persian nationalization enthusiasts (like some of their English prototypes only a few years earlier) agreed with Dr. Musaddiq that all Persians could live in ease and affluence if oil were nationalized ; as for expert knowledge surely the nation that invented the Persian miniature could run an oil company? The value of the company to Persia was also not understood ; faulty publicity may have been partly the cause of this ignorance, but the company’s hands were tied. Razmara had insisted on the closest secrecy in the recent negotiations ; it had been objected that the company’s offer in the Supplemental Agreement was intricate to a degree which prevent understanding by either friends or enemies of the company, but here too the reason seems to have been, in part at least, the preference of the Persian Government for the complicated system of payments which had found favour in 1933. It is not clear whether the company could not, even so, have found means of putting its terms in some simple, dramatic form before the country ; certainly the conviction remained — ridiculous though it was — that Persia was gaining but a tiny share of the vast profits. On 25 May Dr. Musaddiq told correspondents that the Persian people wore opening ‘a hidden treasure upon which lies a dragon’ and that the miserable living conditions of the people could be improved only by foreign loans ‘or by the boundless income from South Persian oil’.

Persia had, in fact, in the 1949 negotiations, decided that increased payments under the conditions prescribed by the 1933 Convention were more advantageous to her than an equal sharing of profits with the company. When on 31 December 1950 the Arabian American Oil Company (Aramco) made an agreement with the Saudi Arabian Government for a 50-50 sharing of profits after deduction of United States income tax, the A.I.O.C. suggested to Razmara the discussion of an Anglo-Persian agreement on similar lines ; owing to the nature of British income-tax law such an arrangement would have cost the A.I.O.C. more than the American company. The A.I.O.C. was justified in saying in its annual report of December 1951 that ‘there was no question of the company being behindhand or less generous in its revised payments than other companies operating in the Middle East ; the record shows the reverse to be true’. The British Government’s White Paper, Persia No. 1 (1951) (Cmd. 8425), reinforces this conclusion. A 50-50 sharing arrangement would have given the Persian Government something like £50 million in 1951. The company could also point with justifiable satisfaction to its expenditrure of £39 million during the previous three years on health, housing, educational, and social services ; its training and encouragement of a large Persian staff ; and its indirect benefits to Persia, such as its purchases during 1950 alone of Persian currency totalling £21 million (at a rate of exchange which allowed the Persian Government to make a profit of some £7 million on the transaction).

The vehemence of the Persian drive for nationalization naturally obscured these favourable facts for a time, but when it became clear in Britain and elsewhere that Persia really did seem to be about to kill the goose that was laying such golden eggs, there were some rather bewildered attempts to find an explanation. Experts seemed to agree that the feeling against the company and the British was widespread, and that the company had been made the scapegoat for the social backwardness of the country ; that the well-being of its staff was little known to the masses in Persia, owing to the isolation of the company’s operations on the coast ; and that certain peculiarities of the Persian temperament, a fantastical belief in Persian prowess, envy of others’ efficiency and success, and a lack of moral courage in pressing unpopular causes prevented appreciation of the extreme usefulness of the company, quite apart from its legal rights. In Persia, as in Egypt, poverty and discontent promised an early revolution against the rich landlord-politician class. But if all this were true, what was the best course for the company and the British Government to follow? It seemed quite clear that although Russia had apparently played no part in inspiring the attack on the company she would benefit from its expulsion, both by the reduction of oil supplies (particularly aviation spirit) to the Western Powers, and later, perhaps, by revolution if nationalization failed to prove the panacea for Persia’s ills. On the other hand any use of force to protect the company’s property at Abadan might bring about Soviet invasion in the north in accordance with the Soviet-Persian Treaty of 1921 ; threatening language from London might play into the hands of the nationalists, who were apparently only too anxious for proof of British ‘imperialism’. It seemed to Mr. Morrison (and presumably to his Foreign Office advisers) best on the whole to rely for the time being on reasonableness and reason.

On the day after General Razmara’s assassination the Oil Commission adopted a resolution accepting the principle of oil nationalization, and asking for a further two months’ time to study the execution of this proposal ; a Single Act Bill on those lines was passed by the Majlis on 15 March, and by the Senate on the 20th. Hussain Ala, who succeeded Razmara, did not provide, or perhaps wish to provide, the firm action which, if taken promptly after Razmara’s death, might have provoked a breach with the company. On 26 April the Oil Commission resolved unanimously on immediate nationalization ; the company made a formal protest on the 27th ; Hussain Ala resigned ; Dr. Musaddiq succeeded him, and a Bill to nationalize the oil industry was passed unanimously by the Majlis and Senate, and promulgated by the Shah on 1 May. This was the Nine-Point Law which formed the basis of the Persian Government’s action during the succeeding months. It avoided for the immediate dispossession of the ‘former Anglo-lranian Oil Company’ by a mixed board (consisting of five Deputies, five Senators, and the Minister of Finance) ; if the company refused to hand over at once on the ground of existing claims on the Persian Government the Government could, by mutual agreement, deposit in a bank up to 25 per cent, of current revenue from the oil, after deduction of exploitation expenses, in order to moot the probable claims of the company ; the mixed board would closely supervise exploitation and audit the company’s accounts and was within three months to hand over the control of the industry to a National Oil Company. Former purchasers of the oil would continue to be supplied at a fair international price ; Persian experts to replace all foreigners would be trained abroad.

The British and United States Governments were both concerned at these developments ; in the Anglo-American oil talks which began in Washington on 9 April the Persian problem was discussed, and a statement was issued recalling that both countries had declared in May 1960 their interest in the continued independence of Persia, and had given proof of their willingness to provide Persia with assistance. On 26 April the British ambassador, Sir Francis Shepherd, handed an aide memoire to the Persian Prime Minister which declined to accept the Persian contention that the oil dispute did not concern the British Government, and proceeded to refer sympathetically to the natural desire of the Persian people to play a more direct part in this important field of their national activity. It then proposed a now United King dom company to take over the A.I.O.C.’s concession and assets in Persia, with adequate representation of the Persian Government and a 60-50 sharing of profits ; a Persian national company to distribute oil in Persia ; and provision for the accelerated ‘Iranianization’ of the new company’s staff. In the House of Commons on 1 May Mr. Morrison spoke in moderate tones, and said that the British Government were most anxious to settle the matter by negotiation, but could not negotiate under duress. Comments from the Opposition and Labour back benches were restrained ; Lord Salisbury, in the Lords, was more outspoken, and said that it was ‘a very bad story indeed’ and that weakness now would be fatal. But these approaches, and further representations by Mr. Morrison during the next few days, were brushed aside by Dr. Musaddiq in a message of 8 May which said that it was the sovereign right of every nation to nationalize its industries, and that his Government were ready to consider the claims of the ‘former oil company’.

On the same day the company formally notified the Persian Government that it requested arbitration under the 1933 Convention ; when the Government made no move to appoint an arbitrator the company applied to the International Court of Justice, and at the same time the U.K. Government instituted proceedings before the International Court. On 30 May the Persian Government, in a Note to the company, said that they were willing to use the company’s knowledge and experionce in implementing the Nationalization Act ; representatives of the company accordingly met Persian delegates, but it became clear almost at once that they were empowered to discuss only the thoroughgoing implementation of the Nationalization Law. At the same time a temporary board of directors of the ‘National Iranian Oil Company’ proceeded to interfere with, and to take over with threats of force, the management of the oil-fields. The British staff were requested to say whether they wished to enter the service of the nationalized industry ; all refused to do so. Oil shipments from Abadan ceased when the master’s of tankers refused to sign receipts for oil acknowledging the right of the Persian Government to dispose of the oil. An Order of the Hague Court on 6 July directed that pending a final judgement on the British application of 26 May, nothing should be done by the Persian Government to hinder the working of the operations which the company was carrying out before 1 May, and that a Board of Supervision should be appointed to ensure that full effect was given to this provision. However, the Persian Government declined to accept the validity of the Order or the competence of the Court to deal with the matter.

Mr. Morrison’s dilemma was now acute. If Dr. Musaddiq pushed matters to extremes, should the company withdraw completely from Persia, leaving the Persians to discover in their own good time that they had not the skill or the tankers to carry on? The world had alternative sources of oil (although the closing of the Abadan refinery would seriously affect supplies of aviation spirit), and transportation difficulties would prevent any substantial advantage to Russia, even if the Persians were willing to sell to her. But any such tame surrender of oil, profits, and reputation would be a heavy blow to British prestige, with serious repercussions throughout the Middle East. Should force, or threats of force, be used? This savoured too much of ‘old-fashioned imperialism’ for Mr. Morrison and many of his supporters ; the United States was opposed, and Russia might march in in the north. Yet in a Commons debate on 21 June Mr. Phillips Price voiced the feelings of many Members when he said that, while hoping that force would not be necessary, he felt that a little healthy growl from the British lion would not be a bad thing. Mr. Morrison, on 20 June, described the company’s proposals as eminently reasonable and spoke of the company’s servants being subjected to ‘riots, abuse, misrepresentations, and uncertainty about the future’ ; Persia was being repeatedly told that if they were not protected, the British Government would have to act accordingly. But there was no sign of what this meant in practice, although on the 26th Mr. Morrison said that H.M.S. Mauritius would be sent at once. Nor would he be drawn on the subject of evacuation. The Opposition was very dissatisfied with his speech in the debate on the 21st, called by Mr. Eden (on the 23rd) a ‘ragged disquisition’ telling nothing. Right up to mid-July Mr. Churchill showed extreme caution in speaking on the Persian question : perhaps he was being especially careful to avoid the appellation of ‘war-monger’. But Mr. Eden and Lord Salisbury were more outspoken, as was also Mr. Churchill’s son-in-law, Mr. Sandys. [Duncan Sandys] On 21 June Mr. Eden said that evacuation would be disastrous, an abject surrender to the threat of force, and he was not inclined to minimize (as were the Foreign Secretary and the Minister of Fuel) the effect of the loss of the oil.

The Persian Government’s only sign of amenability to reason was the dropping at the end of June of an anti-sabotage law which would have made the servants of the company liable to trial by military courts if they did not. He down under the Persian heel. The Persians continued to blame the company for any interruption of oil supplies or damage to delicate installations (though looting was rife) and professed to have found incriminating evidence in raids on the company’s offices. On 6 July the spokesman of the Oil Commission said that the sending of the Mauritius was a bluff and that the whole population would resist by force any attempts to put a single marine ashore. He threatened to use technicians from satellite countries, since the U.S. oil companies (contrary, apparently, to the original Persian expectation) had shown no desire to replace the British. A stiff British Note on 30 June had laid the responsibility for the interruption of operations on Persia and stated that ‘in the view of his Majesty’s Government, the crude oil and refined products produced by the Anglo-Iranian Oil Company are the property of that Company’. It was now accepted that the company’s staff must be withdrawn from the oil-fields to Abadan, and that many European employees must be sent home.

On 11 July Dr. Musaddiq agreed to receive President Truman’s envoy, Mr. Harriman, whose mission Mr. Morrison welcomed in the House on the 16th. As a result of his talks Mr. Harriman attended a meeting of Ministers in London on 28 July, and on 3 August a Government mission under Mr. Stokes (Lord Privy Seal and Minister of Materials) left for Tehran to negotiate. Mr. Stokes said that he was ‘an irrevocable optimist’, and there was perhaps some momentary justification for increased hope of a settlement. On 30 July Mr. Attlee said that the Government did not intend to evacuate Abadan entirely.

Mr. Attlee’s assurance came at the end of a debate on the Middle East, in which many references were made to Egypt as well as to Persia, it being alleged that Britain’s pusillanimity towards Egypt had encouraged the Persians to act against the West. On 1 July a British ship, the Empire Roach, carrying supplies for the Arab Legion in Jordan, was stopped by an Egyptian corvette and held for 24 hours under armed guard, while tho radio was wrecked and stores looted. On 11 July Mr. Morrison said that a strong protest had been made to the Egyptian Government, and that a claim for damages and compensation would be made. On that day Egyptians were demonstrating against Britain on the 69th anniversary of the bombardment of Alexandria. The insult to the Empire Roach took place in Egyptian waters (Mr. Morrison refused to say, on the 16th, whether, as generally accepted, the area was also an international channel) ; the Egyptians claimed that it was in a prohibited zone, where she was fortunate not to be fired at by Egyptian batteries on sight. Their official reply combined limited apologies for longer detention than was necessary with much that seemed (in the light of British information) menacing and inaccurate. While the Arab League declared support for Egypt’s blockade against Israel, Britain, like Israel, took the matter to the Security Counccil. On 19 July Mr. Churchill renewed his criticisms of the release of sterling for Egypt, and on the 30th he had much to say on the Middle East in general. There was a firmness in Mr. Morrison’s speech during this debate which pleased the Opposition (although Mr. Churchill still demanded that sterling should be withheld and that a destroyer at Cowes should not be delivered to Egypt), and also a frankness, which the Egyptian Foreign Minister made the excuse for declaring the door closed to all negotiation.

It soon became clear that Dr. Musaddiq was willing to put matters to the final test. The Stokes mission failed. The British were willing to accept the principle of nationalization, as expounded in the Persian law of 20 March, while the Persians kept harking back to their law of 1 May prescribing detailed provisions of transfer of power. Mr. Stokes visited Abadan on 7 August and thereafter insisted on the conditions made by the technicians — that the management of the vast enterprise should continue to be fully efficient. Mr. Stokes’s proposals involved the recognition of Persian ownership of the oil in the ground, the transfer of the company’s assets in Persia to the National Iranian Oil Company, and provisions to assure the Persians against any British intervention in internal affairs by anyone engaged in the oil industry. But a British purchasing organization would be set up which, under long-term contracts, would transport and market the oil, take 50 per cent of the profits, and arrange with the N.I.O.C. the establishment of a non-profit-making technical agency to manage the operations for the N.I.O.C. This agency would have some Persian directors and would aim to train an increasing number of Persian technicians, but it was insisted that the technical staffs should be responsible to a British manager who would report to the directors, and not be severally responsible to the company. On 23 August Mr. Stokes left Persia, complaining of the doctrinaire attitude of Persian officials utterly ignorant of business management, but arguing that the talks had merely been adjourned and could be renewed at any time by the Persians. Meanwhile a quite imposing British naval force had mustered in the Gulf, and the company announced that while most of the non-Persian staff would be evacuated, a nucleus would stay in Abadan.

The situation subsequently deteriorated further. Persian propagandists asserted that they could produce and refine and sell the oil without British aid. Dr. Musaddiq in a broadcast on 1 September placed the initiative for renewing the discussions on Britain, and during the next few days announced a plan for an ultimatum to the effect that if Britain did not make acceptable proposals within 15 days, the remaining staff of the company would be expelled from Persia. Failing to secure the assent of the Majlis to this (indeed his position seemed weaker than at any previous time) he nevertheless sent the ultimatum to America for dispatch to London. The Foreign Office responded promptly to this pressure. It was announced on 6 September that negotiations were to be regarded as broken off and on the 10th that special financial and trading privileges enjoyed by Persia would be suspended.

The weeks between Mr. Attlee’s announcement, on 19 September, of the forthcoming General Election, and polling day, 25 October, were of almost continuous crisis in the Middle East. The Persian Government seemed determiued to complete the elimination of the A.I.O.C. as speedily as possible, while retaining control of its assets ; one by one senior officials of the company were expelled at short notice. Mr. Harriman on 17 September refused to pass Dr. Musaddiq’s ultimatum on to the British Government. The Persians had proposed in this document the continued employment of British managers under a mixed executive board of Persiau and neutral specialists ; the payment of compensation to the company by any mutually agreed method ; and the sale of 10 million tons of oil annually to Great Britain for internal consumption. The same proposals, without the fortnight’s ultimatum, were sent to the British embassy in Tehran on 20 September in an unsigned, imdated, and unaddressed message ; on 22 September the British Government replied that the message provided no basis for a resumption of negotiations. On 25 September the remaining British employees of the A.I.O.C. were ordered to leave Persia within seven days of 27 September ; on the 28th the British Government announced their decision to bring the dispute before the Security Council. By 4 October the remaining British staff had been withdrawn from Abadan. How exasperating, and indeed bewildering, the behaviour of the Persian Prime Minister! But alas, how tame the behaviour of Mr. Attlee! Or would posterity praise as an act of high statesmanship the decision to refrain from some showy display of force?

It was now Egypt’s turn. On 8 October Nahhas Pasha tabled decrees abrogating the Anglo-Egyptian Treaty of 1936 and the Cond ominium Agreements of 1899 concerning the Sudan, amending King Faruq’s title to ‘King of Egypt and the Sudan’, and setting out the fundamental principles of a Constitution for the Sudan. He contested the British claim that the treaty could not be abrogated unilaterally ; cited precedents ; and said that Egypt rested her case on ‘obvious right and the high principles of the U.N. Charter’. On the 9th Mr. Morrison, after objecting strongly to this action, said that the Egyptian Government knew well that far-reaching proposals were about to be submitted to them, and that full British rights under the treaties would be maintained pentog an agreement with Egypt. The Egyptian decision, arising generally from the nationalist feeling that had accumulated over many years, seemed to have been hastened by the growing unpopularity of the Government’s home policy, their failure to cope with a rising cost of living, and the unsavoury reputation of some of their members ; but there can be little doubt that Nahhas Pasha was emboldened to take the plunge by Persian events.

In the following weeks the British Government showed that they had no intention of allowing themselves to be edged out of Egypt, and the United States Government, which had been reluctant to advance beyond a mediatory position in the Persian dispute, now gave unequivocal support to British policy. On 10 October Mr. Acheson said that the Egyptian Government should not have sought to alter their treaties by unilateral action, and a week later he said that the United States supported Britain’s stand in upholding her position on the Suez Canal. This strong position had to be taken, for it was clear that the question was one which threatened the free world with the collapse of Middle Eastern security. It was in terms of general security that proposals, which might have extricated Egypt from the impasse, were made on 13 October. Defence plans had taken a step forward during the meeting of the North Atlantic Council at Ottawa in September ; on 20 September it had been announced that, subject to the approval of national Parliaments, Greece and Turkey should be invited to accede to the treaty. Comprehensive proposals were now made to Egypt by Britain, the U.S.A., Prance, and Turkey for the setting up of an Allied Middle Eastern Command in which the four States would participate and in wliich Egypt was invited to take part as a founder member. Egypt would be expected to contribute on the same footing as the participating Powers, and Great Britain would then agree to the suspension of the Anglo-Egyptian Treaty of 1936 and the withdrawal of such British forces as would not be needed by the joint command. Egypt would participate in decisions as to the strength and disposition of the Allied forces, and would be invited to accept positions of high authority and responsibflity ; a technical annexe elaborated the details. The proposals were promptly rejected without examination by the Egyptian Government. British proposals for the future of the Sudan, including the setting up of an international commission, were also presented on 13 October and were likewise rejected.

From this point it seemed clear that the world and the Middle East had to await the result of the General Election in the United Kingdom. Most of the more prominent causes of Anglo-American friction had now been remedied ; Persia, Egypt, Germany, and the still suspended Korean armistice talks remained for urgent discussion in the near future. The most conspicuous gap in the defence plans and the most serious danger to world peace seemed now to be in the Middle East, although even here there were some hopeful signs. Turkey was co-operating with the Atlantic Powers ; in London the Iraqi Prime Minister signed am agreement with the Iraq Petroleum Company not dissimilar to that proposed by Mr. Stokes in Persia ; the new ruler of Jordan denied that he was anti-British ; and, despite the Arab League’s support of Egypt’s defiance of the Security Council, there were prospects of talks between the Arab States and Israel.

FOREIGN HISTORY

CHAPTER IV

THE GENERAL ELECTION— AND AFTER

(October — December)